Title

Author (Your Name)

Date of Award

2015

Document Type

Honors Thesis (Open Access)

Department

Colby College. Economics Dept.

Advisor(s)

Timothy Hubbard

Second Advisor

Leonard Wolk

Abstract

Individual decision making is at the core of microeconomics. Rarely, however, are decisions made in environments without some element of uncertainty or even in isolation. While people may differ in their inherent willingness to take on risk, their preferences could change when new information is learned or a new relationship is fostered. I designed an experiment in which participants were asked to make investment decisions involving different levels of risk. The participants completed task between these gambles which allowed me to introduce competitive and collaborative relationships. I was interested in: (1) understanding the factors that are important to explaining risk attitudes, (2) whether people change their risk attitudes, and (3) if attitudes are flexible, whether the type of interaction individuals were exposed to would influence their preference for risk. Using 181 participants from Colby College, I found a number of interesting trends in the data. First, I found that gender, playing a varsity sport, and political party affiliation are all significant predictors of risk preference. Second, individuals often changed their risk attitudes during the experiment, even when aggregate information concerning choices made by others was released. Moreover, I found that subjects in a cooperative environment were more likely to converge towards their partner's risk preferences than subjects in a competitive environment or control environment. I also found evidence showing that in competitive environments, like-gender groups were on average more risk seeking than mixed gender groups. These results are particularly interesting when considering group behavior and team dynamics in government, business, and social settings.

Copyright

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